Is it Finally Time for Change in the Insurance Industry?

I’m not sure if you feel the same, but I have lost count of the number of times I’ve been told that IoT or telemetry data was going to change the motor insurance market.

Is insurance immune from the surge in data-driven applications in other industries?

Of course not, as actuaries were amongst the first ‘analysts’ – using claims data to underwrite policies – but how else can we explain the slow uptake of new data resources?

We’ve seen changes around the edges – for example, the black boxes placed in the cars of young drivers or harvesting telematics data from apps – but I think we’d be hard pressed to read “transformation” into that. Indeed, only the other day my 22-year-old daughter told me she’s got a simpler (traditional) policy on her latest renewal.

Elsewhere, the ownership model is shifting – but only on the margin and in large urban areas for now, with the rise of services like ZipCar and Uber. The number of passenger cars in the EU topped 250m in 2020, a record high.

An old problem with data for insurers

I think that the main issue is the old problem of access to data – for all that cars are now computers with wheels, that rich performance data is shielded in three layers of shielding:

• Cars are not connected in a meaningful way as most data is only accessible in the Dealer’s workshop. I’d differentiate telematics data from the connected car in this, although the cost of the former is not trivial and incremental to that of a connected car, which reduces the advantage of access.
• Car manufacturers treat connected car data as proprietary to their ecosystem – and they are large and global, where the insurance industry is fragmented and often local. Data access for insurers reflect that power inequity.
• And we can’t forget data protection laws and, increasingly, regulations aimed at addressing the age-old problem of fairness. This has always been around but recently has taken on more importance.

I do think there is change in the air, however, and this is clearly articulated in a recent IDC InfoBrief entitled “Motor insurance: "Shift into High Gear to Drive Customer Engagement," sponsored by Teradata.

The driver of change is the Driver

Pun intended. Customer expectations are formed in other industries and tech (and auto-manufacturers) companies are starting to bring large-scale data and analytics disciplines to the sector.

Self-driving cars are an obvious example of the use of data and analytics, but capabilities like adaptive cruise control are spreading faster and more widely - and all have obvious implications for underwriting risk, of course.

More than this, however, how the driver customer experience integrates across all the players in the industry is becoming increasingly important. This is where insurers need to up their game to keep up with the other participants. When I fill out my personal details on a web form to get a new quote, the only real difference versus my experience 30 years ago is that I have to do all the work… previously, someone else did the work. Is that better? Renewals pretty much feel the same as they did, with the addition of auto-renewals.

Claims processing still has potential to realise
The other key moment of truth is a claim. Whilst there has been much investment in improving the efficiency of the claims process, more remains to be done.

I had the misfortune of being hit by a van a year or so ago when stopped at a pedestrian crossing and the experience felt a lot like it did 20 years ago… my claims are fortunately not that frequent!

Sure, I could upload photos of the damage, “participants” and situation, but everything else felt quite manual – the delays my insurer incurred dealing with the other insurer as they wrote to eat other, for example.

• Could I track my claim? No.
• Did the repairer keep me updated? Yes, but it wasn’t integrated with anything else.
• Did I settle the excess? Of course, but the insurer already had my payment details so why did I need to make a separate call?

Whilst some of the data challenges outlined are outside the control of the insurer, the development of a more integrated data ecosystem including suppliers, other industry participants, becomes even more critical and those internal opportunities to deliver a better experience need to be fully exploited.

What needs to be done?
Of course, every insurer is at a different start point, but IDC estimates two thirds of insurers have yet to develop digital-bonding experiences with clients and has highlighted actions across the customer journey that each one should be considering.

And, of course, the question is often not “are we doing this?” but “are we doing enough and at a fast-enough pace?”

• Investing in real-time information integration
• Deliver the right information to the right channel at the right time
• Creating a connected mobility data ecosystem
• Align on enterprise-wide customer engagement goals and quality metrics
• Building a best-in-class ratemaking “AI brain”
• A platform-first approach to data management can accelerate AI development and rollout.

IDC conclude that “front- and back-office processes must stand on the shoulders of common information sources.”
Can your insurer say it has achieved that?

Where do I go next?
Teradata’s track record in safely managing billions of sensitive transaction and customer records provides the solid foundations upon which cloud-based analytics can be based. You’ll see from IDC’s report the huge advantages of orchestrating data across all sources with minimal movement and replication.

Starting with discrete projects and then expanding to wider use cases and adoption represents a safe and secure path to the analytics cloud for even the most risk averse manager. If you’d like to learn more about how Teradata is supporting business leaders as they reimagine the Insurer of the Future, please get in touch.